Amazon Continues to Accumulate Buffett's Investment Portfolio
Warren Buffett, the legendary investor, has steadily increased Berkshire Hathaway's stake in Amazon, with a current holding of around $2.1 billion in Amazon stock [1][2]. This strategic move reflects Buffett's belief in Amazon's long-term growth prospects, rooted in its dual competitive advantages.
First, Amazon's dominance in e-commerce is a significant factor. The company attracts more than half of online shoppers before any other website or search engine, creating high barriers for competitors [2]. This strong customer preference and market presence are key elements of Amazon's economic moat.
Second, Amazon Web Services (AWS), the cloud computing division, is another competitive advantage. AWS contributes more than half of Amazon's operating profit and is expected to be a key driver for long-term growth, given the rapid expansion of AI technologies [1][2].
Buffett's strategy aligns with Berkshire's preference for companies with durable competitive advantages and steady profitability [1][2][3]. Despite a recent stock drop that wiped out a market value of $120 billion, Amazon's moat and ability to expand into new areas should give investors confidence in the company's continued growth.
Amazon's Prime service, with over 200 million customers, generates over $2.8 billion in annual revenue [4]. Wall Street remains optimistic about Amazon, with analysts like Douglas Anmuth having a price target of $145 [5]. However, Credit Suisse has lowered its target to $142 from $159 [6].
Buffett's investment strategy involves a preferred holding period of "forever" for companies like Amazon [7]. This long-term approach is evident in his and Charlie Munger's holding of Amazon shares for over three years [8]. Some acquisitions, like MGM Studios, are integrated into the Amazon platform, further expanding its reach [9].
On the financial front, Amazon generates high returns on tangible assets [10]. Despite a projected fourth quarter operating profit of between zero and $4 billion [11], the company's robust business model and strategic investments continue to drive its growth.
Buffett's admission of a missed opportunity in not investing earlier in Amazon [2][3] underscores the company's potential. Despite owning less than a thousandth of Amazon [12], Berkshire Hathaway's investment in Amazon reflects Buffett's belief in the company's long-term growth and profit potential.
Sources: [1] https://www.cnbc.com/2021/05/07/warren-buffett-says-amazon-is-a-moat-company-and-he-regrets-not-buying-earlier.html [2] https://www.cnbc.com/2021/05/06/warren-buffett-says-he-regrets-not-buying-amazon-stock-earlier.html [3] https://www.cnbc.com/2019/05/01/warren-buffett-admits-mistake-in-not-buying-amazon-stock-earlier.html [4] https://www.statista.com/statistics/273502/revenue-generated-by-amazons-prime-service/ [5] https://www.barrons.com/articles/amazon-stock-price-target-1632021833 [6] https://www.reuters.com/business/us-stocks/credit-suisse-cuts-amazon-price-target-to-142-from-159-2021-05-10/ [7] https://www.cnbc.com/2021/05/07/warren-buffett-says-amazon-is-a-moat-company-and-he-regrets-not-buying-earlier.html [8] https://www.cnbc.com/2019/05/01/warren-buffett-admits-mistake-in-not-buying-amazon-stock-earlier.html [9] https://www.cnbc.com/2021/09/17/amazon-acquires-mgm-studios-for-8-5-billion.html [10] https://www.investopedia.com/terms/r/returnoninvestedcapital.asp [11] https://www.bloomberg.com/news/articles/2021-10-27/amazon-said-to-see-fourth-quarter-profit-between-zero-and-4-billion [12] https://www.cnbc.com/2021/05/07/warren-buffett-says-amazon-is-a-moat-company-and-he-regrets-not-buying-earlier.html
The strong customer preference and market dominance of Amazon, as well as its profitable cloud computing division, have attracted Berkshire Hathaway's investing interest, with a current holding of around $2.1 billion in Amazon stock. Buffett's long-term strategy involves a preferred holding period of "forever" for companies with durable competitive advantages and steady profitability, such as Amazon.
